Welcome to this week’s Property News.
With lockdowns becoming longer and more widespread, the impacts to office and retail real estate continue to be felt.
Without a common federal approach, States are issuing state based leasing regulations to assist Landlords and Tenants to work through the issue of lockdown. In NSW, retail and commercial landlords must attempt mediation before taking enforcement action against a certain classes of impacted tenants who are eligible for the State government grants (See here for more info). Similar regulations are in place in QLD. The rules in VIC go further with Landlords required to provide proportional rent relief in line with a business’s reduction in turnover with half of the rent relief waived and half deferred as well as a mediation process. In that State, the government is providing $80million in hardship support for Landlords (read more here).
Notwithstanding the short term impacts, the investment markets continue to pile more money into the Office and Retail markets. Mirvacs’ acquisition of AMP Capital 50% interest in 200 George Street at a 4.2% yield is a case in point. The building sits in a prime location in the Sydney CBD and is surrounded by major new developments competing for tenants. The key tenant, Ernst & Young has a lease expiring in 5 years and will be in a good position to renegotiate better terms with Mirvac, which could see the value of the asset challenged in years ahead.
In the Retail Sector, SCentre and Vicinity announced major redevelopment plans for Knox and Box Hill respectively. For Westfield Knox, the first phase of the re-development will see the introduction of Woolworths and ALDI, a brand-new fresh food market, casual dining precinct, a café, and food catering experience, scheduled to open in 2022. Pretty much as expected, but the interesting point is that for stage 2, Westfield are having to turn to non-traditional concepts including a contemporary public library, other communal spaces (such as gated dog park & swim schools), co-working offices, multi-sports centres and multi-purpose spaces for art performances and lessons. Most of which are hard to undertake on line and will require physical attendance. For Box Hill, Vicinity will be concentrating its works on cosmetic improvements, more fresh food and food dining and on fixing access and movement issues to make the Centre more convenient.
There is no doubt that convenience will remain a key ingredient to any real estate asset the relies on peoples’ attendance to pay the rent, beyond that, it is about curating a place where people can get and do what they want and need. The challenge of course is to do this in a manner that can deliver the highest return possible for all stakeholders.
If you have any news, information or research reports you’d like us to share with the market, please feel free to send me an email at info@propertymarkets.news.
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